ISLAMABAD: Pakistan’s Gross Domestic Product (GDP) has been estimated at 2.17 percent for the first quarter of the current fiscal year by the Pakistan Bureau of Statistics (PBS); however, a negative financial account in October 2023 indicates the country is not getting new inflows from abroad.
Speaking at “Paisa Bolta Hai” with Anjum Ibrahim on the state of the economy, former finance minister Dr Hafeez Pasha said certainly every one desires that country’s economy, which has declined considerably, begins improving but there is a mix picture with overall a small beginning.
Pasha explained that the PBS – which has done for the first time quarterly estimates of the GDP – projected that the GDP growth positive by 2.17 per cent in the first quarter of the current fiscal year.
He pointed out that the PBS had also revised the GDP growth for the last fiscal year to negative. He further explained that PBS first quarter estimates show that there is double digit increase in major crops –cotton and rice, and nominal increase in large scale manufacturing.
Pasha added that service sector which contributes 60 per cent to the economy is still negative and in services sector finance and insurance has been negative due to sky high interest rate.
There has been acute decline in banking sector’s borrowing and private sector has gone into negative in terms of borrowing, he further stated. Additionally, Pasha said that there is also significant decline in public administration sector, according to PBS. So there is a mix picture, overall a small beginning but have to wait for some time, added Pasha.
He said that there is decline in current account deficit as the State Bank of Pakistan (SBP) is managing imports with some decency, adding that this issue was discussed with the International Monetary Fund (IMF) that market-based exchange rate policy would be introduced and imports would not be physically regulated but it seems the regulation is continuing.
The former finance minister explained that there are two components of balance of payment with one current account which of course is very low due to controlling of import but what is more disturbing is that the financial account in October2023 has become negative because country is not getting new inflows from abroad and it has to make repayment of old debt.
As a result, he explained that the country’s financial account is negative and thus, the entire balance of payment has also been negative. This led to decline of more than $200 million in foreign exchange reserves during the last week, he added.
Pasha pointed that the multilaterals, which are major concessionary supporters of finance – ADB, WB, AIIB and IDB - have gone back and country received only $550million in the first five months against expected $6.5 to 7 billion from them for the current fiscal year. He said that multilaterals have gone back and this concern was also raised by the IMF in writing in review note that it is concerned over lack of external inflow to Pakistan.
Hafeez Pasha urged the caretakers not to create false sense of complacency by making announcement that the SIFC would bring $25 billion in next few weeks. We want that it should bring investment but so far it has not, he added.
He dispelled the notion of caretaker prime minister that multilaterals do not want to engage with caretaker and would engage with the elected government and stated that in the past, caretaker had successfully negotiated with the Fund.
He said that the problem is not caretaker government, rather figures, gaps, and financial needs of the country has become so dangerous that now the bilateral and multilaterals have also pulled their hands after impossibility of bonds flotation in global market and commercial borrowing.
He said that policy changes during the PDM government with regard to exchange rate have eroded credibility of the country and finally the programme was done by Shehbaz Sharif in Paris.
He said that last experience of the lender with Pakistan, especially during Dar as finance minister was not appropriate and multilaterals might be concerned over his possible return as finance minister. Pasha said that rate of headline inflation is not decreasing and PBS inflation is understated by the PBS as if gas tariff and house rent is property taken the headline inflation could have be between 37-40 per cent.
Copyright Business Recorder, 2023